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Occupy Movement Gets Some Respect

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Much has changed since the inception of the Occupy Wall Street movement.   When the occupation of Zuccotti Park began on September 17, the initial response from mainstream news outlets was to simply ignore it – with no mention of the event whatsoever.  When that didn’t work, the next tactic involved using the “giggle factor” to characterize the protesters as “hippies” or twenty-something “hippie wanna-bes”, attempting to mimic the protests in which their parents participated during the late-1960s.  When that mischaracterization failed to get any traction, the presstitutes’ condemnation of the occupation events – which had expanded from nationwide to worldwide – became more desperate:  The participants were called everything from “socialists” to “anti-Semites”.  Obviously, some of this prattle continues to emanate from unimaginative bloviators.  Nevertheless, it didn’t take long for respectable news sources to give serious consideration to the OWS effort.

One month after the occupation of Zuccotti Park began, The Economist explained why the movement had so much appeal to a broad spectrum of the population:

So the big banks’ apologies for their role in messing up the world economy have been grudging and late, and Joe Taxpayer has yet to hear a heartfelt “thank you” for bailing them out.  Summoned before Congress, Wall Street bosses have made lawyerised statements that make them sound arrogant, greedy and unrepentant.  A grand gesture or two – such as slashing bonuses or giving away a tonne of money – might have gone some way towards restoring public faith in the industry.  But we will never know because it didn’t happen.

Reports eventually began to surface, revealing that many “Wall Street insiders” actually supported the occupiers.  Writing for the DealBook blog at The New York Times, Jesse Eisinger provided us with the laments of a few Wall Street insiders, whose attitudes have been aligned with those of the OWS movement.

By late December, it became obvious that the counter-insurgency effort had expanded.   At The eXiled blog, Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement.  In January, New York Mayor Michael Bloomberg lashed out against the OWS protesters by parroting what has become The Big Lie of our time.  In response to a question about Occupy Wall Street, Mayor Bloomberg said this:

“It was not the banks that created the mortgage crisis.  It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

The counterpunch to Mayor Bloomberg’s remark was swift and effective.  Barry Ritholtz wrote a piece for The Washington Post entitled “What caused the financial crisis?  The Big Lie goes viral”.  After The Washington Post published the Ritholtz piece, a good deal of supportive commentary emerged – as observed by Ritholtz himself:

Since then, both Bloomberg.com and Reuters each have picked up the Big Lie theme. (Columbia Journalism Review as well).  In today’s NYT, Joe Nocera does too, once again calling out those who are pushing the false narrative for political or ideological reasons in a column simply called “The Big Lie“.

Once the new year began, the Occupy Oakland situation quickly deteriorated.  Chris Hedges of Truthdig took a hard look at the faction responsible for the “feral” behavior, raising the question of whether provocateurs could have been inciting the ugly antics:

The presence of Black Bloc anarchists – so named because they dress in black, obscure their faces, move as a unified mass, seek physical confrontations with police and destroy property – is a gift from heaven to the security and surveillance state.

Chris Hedges gave further consideration to the involvement of provocateurs in the Black Bloc faction on February 13:

Occupy’s most powerful asset is that it articulates this truth.  And this truth is understood by the mainstream, the 99 percent.  If the movement is severed from the mainstream, which I expect is the primary goal of the Department of Homeland Security and the FBI, it will be crippled and easily contained.  Other, more militant groups may rise and even flourish, but if the Occupy movement is to retain the majority it will have to fight within self-imposed limitations of nonviolence.

Despite the negative publicity generated by the puerile pranks of the Black Bloc, the Occupy movement turned a corner on February 13, when Occupy the SEC released its 325-page comment letter concerning the Securities and Exchange Commission’s draft “Volcker Rule”.  (The Volcker Rule contains the provisions in the Dodd-Frank financial reform act which restrict the ability of banks to make risky bets with their own money).  Occupy the SEC took advantage of the “open comment period” which is notoriously exploited by lobbyists and industry groups whenever an administrative agency introduces a new rule.  The K Street payola artists usually see this as their last chance to “un-write” regulations.

The most enthusiastic response to Occupy the SEC’s comment letter came from Felix Salmon of Reuters:

Occupy the SEC is the wonky finreg arm of Occupy Wall Street, and its main authors are worth naming and celebrating:  Akshat Tewary, Alexis Goldstein, Corley Miller, George Bailey, Caitlin Kline, Elizabeth Friedrich, and Eric Taylor.  If you can’t read the whole thing, at least read the introductory comments, on pages 3-6, both for their substance and for the panache of their delivery.  A taster:

During the legislative process, the Volcker Rule was woefully enfeebled by the addition of numerous loopholes and exceptions.  The banking lobby exerted inordinate influence on Congress and succeeded in diluting the statute, despite the catastrophic failures that bank policies have produced and continue to produce…

The Proposed Rule also evinces a remarkable solicitude for the interests of banking corporations over those of investors, consumers, taxpayers and other human beings. 

*   *   *

There’s lots more where that comes from, including the indelible vision of how “the Volcker Rule simply removes the government’s all-too-visible hand from underneath the pampered haunches of banking conglomerates”.  But the real substance is in the following hundreds of pages, where the authors go through the Volcker Rule line by line, explaining where it’s useless and where it can and should be improved.

John Knefel of Salon emphasized how this comment letter exploded the myth that the Occupy movement is simply a group of cynical hippies:

The working group’s detailed policy position gives lie to the common claim that the Occupy Wall Street movement is “well intentioned but misinformed.”  It shows there’s room in the movement both for policy wonks and those chanting “anti-capitalista.”

Even Mayor Bloomberg’s BusinessWeek spoke highly of Occupy the SEC’s efforts.  Karen Weise interviewed Occupy’s Alexis Goldstein, who had previously worked at such Wall Street institutions as Deutsche Bank, where she built IT systems for traders:

Like Goldstein, several members have experience in finance.  Kline says she used to be a derivatives trader.  Tewary is a lawyer who worked on securitization cases at the firm Kaye Scholer, according to his bio on the website of his current firm, Kamlesh Tewary.  Mother Jones, which reported on the group in December, says O’Neil is a former Wall Street quant.

There are parts of the rule that Occupy the SEC would like to see toughened.  For example, Goldstein sees a “big loophole” in the proposed rule that allows banks to make proprietary trades using so-called repurchase agreements, by which one party sells securities to another with the promise to buy back the securities later.  The group wants to make sure other parts aren’t eroded.

Chris Sturr of Dollars & Sense provided this reaction:

From the perspective of someone who’s spent a lot of time in working groups of Occupy Boston, what I love about this story is that it’s early evidence of what Occupy can and will do, beyond “changing the discourse,” which is the best that sympathetic people who haven’t been involved seem to be able to say about Occupy, or just going away and dying off, which is what non-sympathizers think has happened to Occupy.  Many of us have been quietly working away over the winter, and the results will start to be seen in the coming months.

If Chris Sturr’s expectation ultimately proves correct, it will be nice to watch the pro-Wall Street, teevee pundits get challenged by some worthy opponents.


 

The Employment Outlook Debate

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March 10. 2010

The February non-farm payrolls report from the Bureau of Labor Statistics boosted the optimism of many commentators who follow the unemployment crisis.  Nevertheless, predictions about the employment outlook for the remainder of 2010 are extremely conflicting.  Surfing around the web will give you completely divergent prognostications, usually depending on the locale.  Here are some examples:  Los Angeles job outlook expected to improve (Los Angeles Times); Atlanta employers expect to hold payrolls steady — neither hiring nor firing (Atlanta Journal-Constitution) Boston employers expected to add jobs (The Boston Globe — quoting a Manpower report); Employers still skittish on hiring (CNNMoney.com); Columbus hiring prospects for upcoming quarter weaken slightly (ledger-inquirer.com).

In an essay for the istockanalyst.com website, Ockham Research began by pointing out that 8.4 million jobs have been lost since the recession began in December of 2007.  The fact that the S&P 500 has advanced 70% during this time has encouraged pundits to believe in a jobless recovery.  After noting Senator Harry Reid’s odd reaction to the February non-farm payrolls report:  “Only 36,000 people lost their jobs today, which is really good” — the piece continued:

After that blunder, the report on Bloomberg.com struck us in just how optimistic it is towards March’s employment data, thanks in part to temporary hiring for census workers which could add more than 100,000 jobs this month.  However, a strategist for Goldman Sachs (GS) estimated 275,000 job gains; another economist predicted “easily” reaching 300,000.  Chief  US economist at Deutsche Bank (DB) took the prize though, saying that a gain of 450,000 “can’t be ruled out.”

The Ockham Research piece again emphasized that many of the optimistic views are based on the addition of census workers to the rolls of the employed, despite the fact that these are temporary positions, eventually disappearing in mid-summer.  Ockham Research was also dismissive of the inclusion of workers added to payrolls simply because of summertime seasonal employment opportunities.  They concluded on this note:

Of course, no one can predict the future and predictions about macroeconomic data points are extremely thorny.  As much as we would like to believe they are correct and job growth will return in robust fashion, we are a bit skeptical.  They have raised the bar for expectations, so it will be extremely interesting to see the market’s reaction when the data comes in.

The Seeking Alpha website featured a posting by David Goldman which began with these remarks:

.  .  .  it would be hard to envision significant declines in payroll employment from already miserable levels.  But the sort of things that generate jobs — venture capital investments, small business expansion, and so forth — are as dead as the Monty Python parrot.

Mr. Goldman focused on the February Small Business Confidence report by Discover Card, which revealed that America’s small business owners remained cautious about the economy during February as they expected economic conditions to stay largely the same during the coming months.  At the close of the piece, we are reminded of its title, “Where Will the Jobs Come From?”   —

With the continuing catastrophe in both the residential and commercial real estate markets, small business capital has imploded.  And small business surely isn’t getting help from the banking system, where loans still are contracting at the fastest pace on record.

Two economists for the Federal Reserve Bank of San Francisco, Mary Daly and Bart Hobijn, recently published a research paper addressing the surprisingly high unemployment rate for 2009, based on a principle known as Okun’s Law.  They explained it this way:

Okun’s law tells us that, for every 2% that real GDP falls below its trend, we will see a 1% increase in the unemployment rate.  Since real GDP was almost flat in 2009 while its trend level increased by 3%, the unemployment rate under Okun’s law should have increased by 1.5 percentage points.  Instead it rose by 3 percentage points, more than twice the predicted increase.

I will now fast-forward to their conclusion:

The data presented here consistently point to unusually strong productivity growth as the main driver of the departure from Okun’s law in 2009.  A key question that remains unanswered by this analysis is whether this pattern will continue in 2010.  Most forecasters assume that the economy will return to its historical path this year, following Okun’s two-to-one ratio of changes in GDP and changes in unemployment.  Under this scenario, unemployment would begin to edge down this year as the economy recovers and gains momentum.  But there are clearly risks to this view.            .  .   .

Anecdotal evidence suggests that efforts to contain costs and remain nimble in the face of uncertainty have become a fixture in business strategy.  If productivity keeps on growing at an above-average pace, then unemployment forecasts based on Okun’s law could continue to be overly optimistic.

So there you have it.  Pick your favorite prediction and run with it.  The Manpower Employment Outlook Survey seems to have a reasonable take on expectations for the second quarter of 2010:

“U.S. hiring activity is still in neutral, but revving toward first gear,” said Jonas Prising, Manpower president of the Americas.  “It’s moving in the right direction, but it will take some time, with no major speed bumps, before it can accelerate.”

Let’s just hope the road ahead doesn’t have any sinkholes.



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This Fight Is Far From Over

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December 24, 2009

On November 26, I mentioned how apologists for controversial Wall Street giant, Goldman Sachs, were attempting to characterize Goldman’s critics as “conspiracy theorists” in the apparent hope that the use of such a term would discourage continued scrutiny of that firm’s role in causing the financial crisis.  The name-calling tactic didn’t work.  Since that time, my favorite reporter for The New York Times — Pulitzer Prize winner, Gretchen Morgenson — has continued to dig down into a dirty, sickening story about how Goldman Sachs (as well as some other firms) through their deliberate bets against their own financial products, known as Collateralized Debt Obligations (or CDOs) caused the financial crisis and ruined the lives of most Americans.  Ms. Morgenson had previously discussed the opinion of derivatives expert, Janet Tavakoli, who argued that Goldman Sachs “should refund the money it received in the bailout and take back the toxic C.D.O.’s now residing on the Fed’s books”.  Although the Goldman apologists have been quick to point out that the firm repaid the bailout money it received under TARP, the $13 billion received by Goldman Sachs as an AIG counterparty by way of Maiden Lane III, has not been repaid.

On December 23, The New York Times published the latest report written by Gretchen Morgenson and Louise Story revealing how Goldman and other firms created those Collateralized Debt Obligations, sold them to their own customers and then used a new Wall Street index, called the ABX (a way to invest in the direction of mortgage securities) to bet that those same CDOs would fail.  Here’s a passage from the beginning of that superb Morgenson/Story article:

Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance.  Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.

Wait a minute!  Let’s pause for a moment and reflect on that.  “Turbo” Tim Geithner has retained a “special counselor” whose responsibilities included oversight of Tricadia’s parent company.  Tricadia has the dubious honor of having helped cause the financial crisis by creating CDOs and then betting against them.  What’s wrong with this picture?  Our President apparently sees nothing wrong with it.  At this point, that’s not too surprising.

Anyway  . . .  Let’s get back to the Times article:

How these disastrously performing securities were devised is now the subject of scrutiny by investigators in Congress, at the Securities and Exchange Commission and at the Financial Industry Regulatory Authority, Wall Street’s self-regulatory organization, according to people briefed on the investigations.  Those involved with the inquiries declined to comment.

While the investigations are in the early phases, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then bet against the clients who purchased them, people briefed on the matter say.

We can only hope that the investigations by Congress, the SEC and FINRA might result in some type of sanctions.  At this juncture, that sort of accountability just seems like a wild fantasy.

Janet Tavakoli did a follow-up piece of her own for The Huffington Post on December 22.  She is now more critical of the November 17 report prepared by the Special Inspector General of Tarp (SIGTARP) and she continues to demand that Goldman should pay back the billions it received as an AIG counterparty:

The TARP Inspector General’s November 17 report missed the most damaging facts.  Intentionally or otherwise, it was evasive action or just plain whitewash.  The report failed to clarify Goldman’s role in AIG’s near collapse, and that of all the settlement deals, the U.S.taxpayers’ was by far the worst.

*   *   *

Goldman paid mega bonuses in past years subsidized by selling hot air.  Now it proposes to again pay billions in bonuses based on earnings made possible by taxpayer dollars.

Now that the crisis is over, we should ask Goldman Sachs — and all of AIG’s other trading partners involved in these trades — to buy back these mortgage assets at full price.  Alternatively, we can impose a special tax.  Instead of calling it a windfall profits tax, we might label it a “hot air” profits tax.

It was refreshing to read the opinion of someone who felt that Janet Tavakoli was holding back on her criticism of Goldman Sachs in the above-quoted piece.  Thomas Adams is a banking law attorney at Paykin, Kreig and Adams, LLP as well a former managing director of Ambac Financial Group, a bond insurer that is managing to crawl its way out from under the rubble of the CDO catastrophe.  Mr. Adams obviously has no warm spot in his heart for Goldman Sachs.  I continue to take delight in the visual image of a Goldman apologist, blue-faced with smoke coming out of his ears while reading the essay Mr. Adams wrote for Naked Capitalism:

. . .  Ms. Tavakoli stops short of telling the whole story.  While she is very knowledgeable of this market, perhaps she is unaware of the full extent of the wrongdoings Goldman committed by getting themselves paid on the AIG bailout.  The Federal Reserve and the Treasury aided and abetted Goldman Sachs in committing financial and ethical crimes at an astounding level.

*   *   *

But Ms. Tavakoli fails to note that the collapse of the CDO bonds and the collapse of AIG were a deliberate strategy by Goldman.  To realize on their bet against the housing market, Goldman needed the CDO bonds to collapse in value, which would cause AIG to be downgraded and lead to AIG posting collateral and Goldman getting paid for their bet.  I am confident that Goldman Sachs did not reveal to AIG that they were betting on the housing market collapse.

*   *   *

Goldman goes quite a few steps further into despicable territory with their other actions and the body count from Goldman’s actions is so enormous that it crosses over into criminal territory, morally and legally, by getting taxpayer money for their predation.

Goldman made a huge bet that the housing market would collapse.  They profited, on paper, from the tremendous pain suffered by homeowners, investors and taxpayers across the country, they helped make it worse.  Their bet only succeeded because they were able to force the government into bailing out AIG.

In addition, the Federal Reserve and the Treasury, by helping Goldman Sachs to profit from homeowner and investor losses, conceal their misrepresentations to shareholders, destroy insurers by stuffing them with toxic bonds that they marketed as AAA, and escape from the consequences of making a risky bet, committed a grave injustice and, very likely, financial crimes.  Since the bailout, they have actively concealed their actions and mislead the public.  Goldman, the Fed and the Treasury should be investigated for fraud, securities law violations and misappropriation of taxpayer funds.  Based on what I have laid out here, I am confident that they will find ample evidence.

The backlash against the repugnant activities of Goldman Sachs has come a long way from Matt Taibbi’s metaphor describing Goldman as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”  With three investigations underway, the widely-despised icon of Wall Street greed might have more to worry about than its public image.





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